SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrantx
Filed by a Party other than the Registrant ٱ
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ٱ Preliminary Proxy Statement
ٱ Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
x Definitive Proxy Statement
ٱ Definitive Additional Materials
ٱ Soliciting Material Under Rule 14a-12.
USA VIDEO INTERACTIVE CORP.
Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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USA VIDEO INTERACTIVE CORP.
83 Halls Road
Old Lyme, Connecticut 06371
Dear Shareholder:
We invite you to attend our annual meeting of shareholders to be held onFriday, July 9th, 2004, in Calgary, Alberta, Canada. At the meeting you will hear a report on our operations and have a chance to meet your directors and executives.
This mailing includes the formal notice of the meeting, the Report on Form 10-K to the Securities and Exchange Commission and the Proxy Statement. The Proxy Statement tells you more about the agenda and procedures for the annual meeting. It also describes how the Board of Directors operates and gives personal information about our director candidates.
Even if you only own a few shares, we want your shares to be represented at the meeting. I urge you to complete, sign, date, and return your proxy promptly in the enclosed envelope.
To attend the meeting in person, please follow the instructions in the Proxy Statement.
Sincerely yours,
/s/ Edwin Molina
Edwin Molina
President
June 8th, 2004
USA VIDEO INTERACTIVE CORP.
83 Halls Road
Old Lyme, Connecticut 06371
NOTICE OF 2004 ANNUAL MEETING OF SHAREHOLDERS
Time:
11:00 a.m., Mountain Time
Date:
Friday, July 9th, 2004
Place:
Beaumont Church LLP, Barristers and Solicitors
2200 Telus Tower, 411 - 1st Street SE
Calgary, Alberta, Canada T2G 5E7
Purpose:
1.
To elect directors
1.
To ratify the appointment by the Board of Directors of Goldstein Golub Kessler LLP as the Company’s independent auditors for the current fiscal year.
2.
To transact such other business as may properly come before the annual meeting or any adjournment of the meeting.
Only shareholders of record at the close of the business on June 8th, 2004 may vote at the annual meeting.
If you are unable to attend the meeting in person, please read the Notes accompanying the Form of Proxy enclosed herewith and then complete and return the Form of Proxy within the time set out in the Notes. The enclosed Form of Proxy is solicited by management. If you so desire, you may appoint a representative in lieu of management’s designations by striking out the names listed therein and inserting in the space provided the name of the person you wish to represent you at the Meeting.
IF YOU PLAN TO ATTEND THE MEETING YOU MUST FOLLOW THE INSTRUCTIONS SET OUT IN THE FORM OF PROXY AND IN THE INFORMATION CIRCULAR TO ENSURE THAT YOUR SHARES WILL BE VOTED AT THE MEETING.
Your vote is important. Please complete, sign, date, and return your proxy promptly in the enclosed envelope.
By Order of the Board of Directors
By: /s/ Anton J. Drescher
June 8th, 2004
Anton J. Drescher,
Secretary
Please complete, date and sign the enclosed Proxy and return it promptly in the envelope provided, whether or not you plan to attend the 2004 annual meeting of shareholders of USA Video Interactive Corp. If you attend the meeting, you may vote your shares in person if you wish,even if you previously returned your Proxy.
USA Video Interactive Corp.
83 Halls Road
Old Lyme, Connecticut 06371
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is being sent to you in connection with the solicitation of proxies for the 2004 annual meeting of shareholders (the“Annual Meeting”) by the Board of Directors of USA Video Interactive Corp. (the“Company”,“USA Video”,“we” or“us”) to be held at the offices of Beaumont Church LLP, Barristers and Solicitors, 2200 Telus Tower, 411 - 1st Street SE, Calgary, Alberta, Canada, T2G 5E7, at 11:00 a.m., Mountain Time, on Friday, July 9th, 2004, and at any adjournments thereof. This proxy statement and the accompanying Notice of 2004 Annual Meeting of Shareholders and form of proxy were first mailed to stockholders on or about June 14th, 2004. Shareholders are encouraged to review the information provided in this proxy statement in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2003, a copy of which also accompanies this proxy statement.
Who may vote
Only shareholders of the Company as recorded in our stock register at the close of business on June 8th, 2004 (the“Record Date”) may vote at the Annual Meeting. At the close of business on the Record Date, we had 120,962,454 common shares outstanding and entitled to vote, held by approximately 1,483 stockholders of record (excluding warrants to purchase 13,439,642 common shares). Each common share is entitled to one vote on each matter properly brought before the Annual Meeting.
How to vote
You may vote in person at the meeting or by proxy. We recommend that you vote by proxy even if you plan to attend the Annual Meeting. You can always change your vote at the Annual Meeting.
Voting Electronically via the Internet
If your shares are registered in the name of a bank or brokerage you may be eligible to vote your shares electronically over the Internet or by telephone. A large number of banks and brokerage firms are participating in the ADP Investor Communication Services ("ADP") online program, which provides eligible shareholders who receive a paper copy of the proxy statement with the opportunity to vote via the Internet or by telephone. If your bank or brokerage firm is participating in ADP's program, your voting form from the bank or brokerage firm will provide instructions. If your voting form does not reference Internet or telephone information, please complete and return the paper proxy card in the enclosed envelope.
How Proxies work
Giving us your proxy means you authorize us to vote your shares at the Annual Meeting in the manner you direct. You may vote for or not vote for the nominees for director named in this Proxy Statement. You may also vote for or against the proposal to ratify the appointment of Goldstein Golub Kessler LLP as the Company’s independent auditors or abstain from voting.
If you sign and return the enclosed proxy but do not specify how to vote, we will vote your shares in favor of the nominees for director named in this Proxy Statement and in favor of the other proposal described in this Proxy Statement. In the discretion of the proxy holders, the proxies will also be voted for or against such other matters as may properly come before the Annual Meeting. At the date this Proxy Statement went to press we did not know of any other matters to be raised at the Annual Meeting.
The persons named in the enclosed proxy are directors and officers of the Company and you may strike out the names of the persons whom you do not wish to act on your behalf. A shareholder has the right to appoint any person to attend and act for him or her at the Annual Meeting. A Shareholder desiring to appoint a person to represent him at the Annual Meeting may do so either by inserting such person’s name in the blank space provided and striking out the printed names in the form of proxy or by completing another proxy. In either case, the proxy must be delivered to the offices of our Transfer Agent, Computershare Trust Company Inc., 530 8th Avenue SW, Calgary, Alberta, T2P 3S8 at least 48 hours prior to the scheduled commencement of the Annual Meeting.
You may receive more than one proxy depending on how you hold your shares. Shares registered in your name are covered by one proxy. If you hold shares through someone else, such as a bank or broker (that is, in street name) please refer to your proxy card or the information forwarded by your bank, broker or other holder of record for voting instructions. If you want to vote in person at the Annual Meeting, and you hold your shares in street name, you must obtain a proxy from your bank or broker and bring the proxy to the Annual Meeting.
This Proxy Statement and the accompanying proxy card are first being mailed to shareholders on or about June 14th, 2004.
These securityholder materials are being sent to both registered and non-registered owners of the securities. If you are a non-registered owner, and the Company or its agent has sent these materials directly to you, your name and address and information about your holdings of securities, have been obtained in accordance with applicable securities regulatory requirements from the intermediary holding on your behalf.
By choosing to send these materials to you directly, the Company (and not the intermediary holding on your behalf) has assumed responsibility for (i) delivering these materials to you, and (ii) executing your proper voting instructions. Please return your voting instructions as specified in the request for voting instructions.
Revoking a Proxy
You may revoke your proxy before it is voted by submitting a new proxy with a later date, by voting in person at the Annual Meeting, or by notifying our Secretary in writing at #507, 837 West Hastings Street, Vancouver, British Columbia, Canada, V6C 3N6.
In addition to revocation in any other manner permitted by law, a shareholder may revoke a Proxy either by (a) signing a Form of Proxy bearing a later date and depositing it at the place and within the time aforesaid, or (b) signing and dating a written notice of revocation (in the same manner as the Form of Proxy is required to be executed as set out in the notes to the Form of Proxy) and either depositing it at the place and within the time aforesaid or with the Chairman of the Meeting on the day of the Meeting or on the day of any adjournment thereof, or (c) registering with the Scrutineer at the Meeting as a shareholder present in person, whereupon such Proxy shall be deemed to have been revoked.
Only registered shareholders have the right to revoke a proxy. Non-Registered Holders who wish to change their vote must, at least seven days before the Meeting, arrange for their respective Intermediaries to revoke the proxy on their behalf.
Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at our Annual Meeting, you must bring to the Annual Meeting a letter from the broker, bank or other nominee confirming your beneficial ownership of the shares and that such broker, bank or other nominee is not voting your shares.
The persons named in the accompanying Form of Proxy are directors of the Company. A shareholder desiring to appoint some other person (who need not be a shareholder) to represent him or her at the Meeting may do so, either by striking out the printed names and inserting the desired person's name in the blank space provided in the Form of Proxy or by completing another proper Form of Proxy and in either case delivering the completed Proxy to the Company’s transfer agent, Computershare Trust Company Inc., 530 8th Avenue SW, Calgary, Alberta, T2P 3S8, not less than forty-eight (48) hours (excluding Saturdays, Sundays and holidays) before the time fixed for the Meeting or with the Chairman of the Meeting prior to the scheduled commencement of the meeting.
The Form of Proxy must be dated and be signed by the shareholder or by his attorney in writing, or, if the shareholder is a corporation, it must either be under its common seal or signed by a duly authorized officer.
Quorum
To conduct the business of the meeting, we must have a quorum. This means at least a majority of the outstanding shares entitled to vote must be represented at the Annual Meeting, either by proxy or in person.
Votes needed
The three nominees for director receiving a plurality of the votes cast in person or by proxy at the Annual Meeting shall be elected. Approval to ratify the appointment of Goldstein Golub Kessler LLP requires the affirmative vote of a majority of the votes cast in person or by proxy at the Annual Meeting. If the Annual Meeting is adjourned, your shares may be voted by the proxy holder on the new meeting date unless you have revoked your proxy.
Only votes cast “for” or “against” a proposal are counted. Abstentions and broker non-votes (or votes withheld” in the election of directors) will not be counted, except for purposes of determining a quorum. Broker non-votes occur when a broker returns a proxy but does not have authority to vote on a particular proposal.
Attending in person
Only shareholders, their proxy holders, and USA Video’s guests may attend the Annual Meeting.
If you hold your shares through someone else, such as a bank or a broker, send proof of your ownership to the Secretary at the address listed above, or you may bring proof of ownership with you in order to be admitted to the Annual Meeting. Acceptable proof could include an account statement showing that you owned USA Video shares on June 8th, 2004.
We will pay the expenses of soliciting proxies. Proxies may be solicited on our behalf by directors, officers or employees in person or by telephone, email or fax. We will also reimburse banks, brokers and other persons holding shares in their names or in the names of their nominees for their reasonable out-of-pocket expenses in forwarding proxies and proxy material to the beneficial owners of such shares.
Non-Registered Shareholders
Only registered shareholders or duly appointed proxyholders are permitted to vote at the Annual Meeting. Most shareholders of the Company are “non-registered” shareholders because the shares they own are not registered in their names but are instead registered in the name of the brokerage firm, bank or trust company through which they purchased the shares. More particularly, a person is a non-registered shareholder in respect of shares which are held on behalf of that person (the “Non-Registered Holder”) but which are registered either (a) in the name of an intermediary (the “Intermediary”) that the Non-Registered Holder deals with in respect of the shares (Intermediaries include, among others, banks, trust companies, securities dealers or brokers and trustees or administrators of self-administered RRSP’s, RRIF’s, RESP’s and similar p lans); or (b) in the name of a clearing agency (such as The Canadian Depository for Securities Limited (“CDS”)) of which the Intermediary is a participant. In accordance with the requirements of National Instrument 54-101 of the Canadian Securities Administrators, the Company has distributed copies of the Notice of Meeting, Information Circular and Form of Proxy (collectively referred to as the “Meeting Material”) to the clearing agencies and Intermediaries for onward distribution to Non-Registered Holders.
Intermediaries are required to forward the Meeting Material to Non-Registered Holders unless a Non-Registered Holder has waived the right to receive them. Very often, Intermediaries will use service companies to forward the Meeting Material to Non-Registered Holders. Generally, Non-Registered Holders who have not waived the right to receive the Meeting Material will either:
(a)
be given a form of proxy which has already been signed by the Intermediary (typically by a facsimile, stamped signature) which is restricted to the number of shares beneficially owned by the Non-Registered Holder, but which is otherwise not complete. Because the Intermediary has already signed the Form of Proxy, this Form of Proxy is not required to be signed by the Non-Registered Holder when submitting the proxy. In this case, the Non-Registered Holder who wishes to submit a proxy should otherwise properly complete the Form of Proxy and deposit it with the Company’s Registrar and Transfer Agent, Computershare Trust Company Inc., as provided above; or
(b)
more typically, be given a voting instruction form which is not signed by the Intermediary, and which, when properly completed and signed by the Non-Registered Holder and returned to the Intermediary or its service company, will constitute voting instructions (often called a “proxy” or “authorization form”) which the Intermediary must follow. Typically, the proxy authorization form will consist of a one page pre-printed form. Sometimes, instead of the one page printed form, the proxy authorization form will consist of a regular printed proxy form accompanied by a page of instructions that contains a removable label containing a bar-code and other information. In order for the form of proxy to validly constitute a proxy authorization form, the Non-Registered Holder must remove the label from the instructions and affix it to the form of proxy, properly complete and sign the form of proxy and return it to the Intermediary or its service company in accordance with the instructions of the Intermediary or its service company.
In either case, the purpose of this procedure is to permit Non-Registered Holders to direct the voting of the shares that they beneficially own. Should a Non-Registered Holder who receives one of the above forms wish to vote at the Annual Meeting in person, the Non-Registered Holder should strike out the names of the management designated proxy holders named in the form and insert the Non-Registered Holder’s name in the blank space provided (executed by the broker). In either case, Non-Registered Holders should carefully follow the instructions of their Intermediary, including when and where the proxy or proxy authorization form is to be delivered.
ITEM 1:
ELECTION OF DIRECTORS
The board of directors has nominated and recommends FOR election of three of its current directors for election at the Annual Meeting. The enclosed Proxy will be voted FOR the persons nominated unless otherwise indicated. If any of the nominees should be unable to serve or should decline to do so, the discretionary authority provided in the Proxy will be exercised by the proxy holders to vote for a substitute or substitutes to be designated by the Board of Directors. The Board of Directors has no reason to believe that any substitute nominee or nominees will be required.
Each nominee elected as a director will hold office until the next annual meeting of shareholders and until his successor is elected and qualified, or until his earlier death, resignation or retirement. Set forth below for each nominee is his age and his position, if any, in the Company.
The information set forth below as to each nominee for director has been furnished to the Company by the respective nominee.
Name | Age | Position | Period of Service |
Edwin Molina | 48 | Director, Chief Executive Officer and President | Since 1998 |
Anton J. Drescher | 47 | Director, Chief Financial Officer and Secretary | Since 1994 |
Maurice Loverso | 43 | Director | Since 2003 |
Edwin Molina - President, Chief Executive Officer and Director
Mr. Molina served as a Senior Administrator with USA Video from June 1992 to June 30, 1998, when he was appointed President, Chief Executive Officer and a director. Mr. Molina was also a Senior Administrator with Adnet USA LLC, a private California company involved in Internet advertising, from May 1996 to June 1998.
Anton J. Drescher - Chief Financial Officer, Secretary and Director
Mr. Drescher has been Chief Financial Officer of USA Video since December 1994. During the past 5 years to present, Mr. Drescher has provided administrative and consulting services in his capacity as President and a director of Harbour Pacific Capital Corp. since 1998 and Westpoint Management Consultants Ltd. of Vancouver, British Columbia, Canada since 1978. Mr. Drescher also currently serves or has served as a director and/or officer of the following TSX listed companies during the last 5 years: Cal-Star Inc. (1997 to the present), International Tower Hill Mines Ltd. (October 1991 to the present), Quest Ventures Inc. (August 1993 to present), Northern Pine Ventures Inc. (formerly “StorageFlow Systems Corp.”) (February 2003 to present); and Cardero Resource Corp. (March 1996 to April 2000). Mr. Drescher obtained a Diploma in Financial Management from the British Columbia Institute of Technology in June 1974. He also obtained his Certified Management Accountant's designation in October 1981.
Maurice Loverso - Director
Mr. Loverso has been a director of USA Video since May 8th, 2003. He has been President of 3336298 Canada Inc. since 1996, providing financial consultation services to small capital public and private companies and has been a director of Group Intercapital Inc. since 1996, assisting a small cap venture capital firm with financial advice. Previously, from 1992 to 1995, he served as President of Almic Industries, a manufacturer of bathroom vanities and accessories and provided financial consultant services to USA Video from 1992 to 1994. From 1998 to 1999, he was a director of QR Canada Capital Inc., a public company listed for trading on the TSX.
The Board of Directors has no reason to believe that any nominee will not serve if elected. If any nominee is unable to serve as a director, the shares represented by all valid proxies may be voted for the election for such other person(s) as the Board may recommend, unless the Board chooses to reduce the number of directors serving on the Board. Proxies will be voted FOR each nominee unless the shareholder specifies otherwise.
The Board of Directors unanimously recommends a vote FOR the election of each of the nominees named in this Proxy Statement. Proxies solicited by the Board of Directors will be so voted unless shareholders specify otherwise on the accompanying Proxy.
No proposed director:
(a)
is, as at the date of this Proxy Statement, or has been, within 10 years before the date of this Proxy Statement, a director or executive officer of any company (including the Company) that, while that person was acting in that capacity,
(i)
was the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days;
(ii)
was subject to an event that resulted, after the director or executive officer ceased to be a director or executive officer, in the company being the subject of a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive days; or
(iii)
or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or
(b)
has, within the 10 years before the date of this Proxy Statement, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the proposed director.
Meetings of the Board of Directors
During 2003, the Board of Directors held a number of informal meetings, and took action by unanimous written consent on seven occasions.
Audit Committee
The Board of Directors has an audit committee (the“Audit Committee”), which is comprised of Anton J. Drescher and Maurice Loverso. Because Mr. Drescher is a director and a shareholder, he is not considered to be “independent” under the listing standards of the New York Stock Exchange, the American Stock Exchange, or the National Association of Securities Dealers.
The Audit Committee meets with the Company’s independent auditors at least quarterly to discuss the results of the annual audit or interim periodic reviews and to review the financial statements; appoints the independent auditors to be retained; oversees the independence of the independent accountants; evaluates the independent auditors’ performance; approves fees paid to independent auditors and receives and considers the independent auditors’ comments as to controls, adequacy of staff and management performance and procedures in connection with audit and financial controls. The Audit Committee met four times and signed four consent resolutions during fiscal 2003.
The Audit Committee is primarily concerned with the effectiveness of the audits of the Company by its internal audit staff and by the independent auditors. Its duties include: (1) recommending the selection of independent auditors; (2) reviewing the scope of the audit to be conducted by them, as well as the results of their audit; (3) reviewing the organization and scope of the Company’s internal system of audit and financial controls; (4) appraising the Company’s financial reporting activities (including its Proxy Statement and Annual Report) and the accounting standards and principles followed; and (5) examining other reviews relating to compliance by employees with important Company policies and applicable laws. The Audit Committee operates under a written Charter adopted by the Board of Directors, which is attached hereto as Appendix A and is also available by sending a written re quest to our Corporate Secretary at #507, 837 West Hastings Street, Vancouver, British Columbia, V6C 3N6.
Other Committees
The Board of Directors currently has no other committees.
Code of Ethics
The Company has adopted a Code of Ethics and Corporate Disclosure Policy that applies to the directors, officers and employees and Corporate Governance Guidelines that applies to the directors and officers of the Company. A copy of the Code of Ethics, Corporate Disclosure Policy and Corporate Governance Guidelines are posted on the Company’s website athttp://www.usvo.com. These documents are also available in print to any shareholder who requests a copy by sending a written request to our Corporate Secretary at #507, 837 West Hastings Street, Vancouver, British Columbia, V6C 3N6.
Relationship with Our Independent Auditors
The firm of Goldstein Golub Kessler LLP has served as our independent auditors since February 2001 and was our independent auditor for the fiscal years ended December 31, 2000, 2001 and 2002. The Board of Directors has recommended Goldstein Golub Kessler LLP to serve as our independent auditors for the fiscal year ending December 31, 2003.
Services performed by Goldstein Golub Kessler for fiscal 2003 consisted of the examination of our quarterly and annual financial statements and services related to filings with the Securities and Exchange Commission ("SEC").
AUDIT COMMITTEE REPORT
The material in this report is not "soliciting material," is not deemed "filed" with the SEC, and is not to be incorporated by reference in any of our filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date of this proxy statement and irrespective of any general incorporation language therein.
The Audit Committee of the Board assists the Board in carrying out its oversight responsibilities for the Company's financial reporting process, audit process and internal controls.
The Audit Committee has reviewed and discussed the Company’s audited financial statements with management, which has primary responsibility for the financial statements. Goldstein Golub Kessler LLP, the Company’s independent auditors for 2003, are responsible for expressing an opinion on the conformity of the Company’s audited financial statements with generally accepted accounting principles.
In fulfilling its oversight responsibilities, the Audit Committee has reviewed and discussed in detail the audited fiscal year 2003 financial statements with the Company's management and with Goldstein Golub Kessler LLP, the Company's independent auditors. In addition, the Audit Committee has discussed with Goldstein Golub Kessler LLP the matters required to be discussed by Statement on Auditing Standards Number 61, Communication with Audit Committees, as modified or supplemented. The Audit Committee has received the written disclosures and the letter from Goldstein Golub Kessler LLP required by Independence Standards Board Standard Number 1, Independence Discussions with Audit Committees, as modified or supplemented, and has discussed with the independent auditors their independence from the Company and its management. The Audit Committee has also considered whether Goldstein Golub Kessler LLP's provision of n on-audit services to the Company is compatible with the independence of such firm.
Members of the Audit Committee rely on the information provided to them and on the representations made to the Committee by management and USA Video's independent accountants without conducting independent verification of the accuracy of such information and representations. Accordingly, the Audit Committee's oversight does not ensure that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee's considerations and discussions referred to above do not ensure that any audit of USA Video's financial statements conducted by USA Video's internal and independent accountants has been carried out in accordance with generally accepted auditing standards, or that the financial statements are presented in accordance with g enerally accepted accounting principles.
Based on these reviews and discussions, the Audit Committee recommended to the Board, and the Board has approved, that the audited financial statements be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2003, for filing with the Commission.
Based on the Audit Committee's and management's assessment of the performance of Goldstein Golub Kessler LLP during the audit of the Company's financial statements for the fiscal year ending December 31, 2003, the Audit Committee recommended to the Board that Goldstein Golub Kessler LLP be engaged as the Company's independent auditors for fiscal year 2004.
Respectfully submitted,
Anton J. Drescher
Maurice Loverso
SECURITY OWNERSHIP OF DIRECTORS, OFFICERS,
AND CERTAIN BENEFICIAL OWNERS
The following table sets forth as of June 8th, 2004, the number of outstanding common shares of USA Video beneficially owned by (i) each person known to USA Video to beneficially own more than 5% of its outstanding common shares, (ii) each director, (iii) each nominee for director, (iv) each executive officer listed in the Summary Compensation Table, and (iv) all executive officers and directors as a group.
Name | Shares Owned | Percentage of Class |
Edwin Molina | 7,154,424(1) | 5.9% |
Anton J. Drescher | 8,031,885(2) | 6.6% |
Maurice Loverso | -0- | N/A |
All Executive Officers and Directors | 15,186,309 | 12.5% |
(1)
Includes 1,770,000 common shares underlying warrants that are currently exercisable by Mr. Molina. Mr. Molina's address is 83 Halls Road, Old Lyme, Connecticut.
(2)
Includes 925,000 common shares underlying warrants that are currently exercisable by Mr. Drescher. Mr. Drescher's address is #507, 837 West Hastings Street, Vancouver, British Columbia.
(3)
Mr. Loverso's address is Suite 414, 300 St.-Sacrement, Montreal, Quebec.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of theSecurities Exchange Act of 1934 (the“1934 Act”) requires the Company’s directors and executive officers, and persons who own more than ten percent of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and representations that no other reports were required, during the fiscal year ended December 31, 2003, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with.
DIRECTOR AND EXECUTIVE COMPENSATION AND
OTHER TRANSACTIONS WITH MANAGEMENT
The following table sets forth compensation awarded to, earned by or paid to the Company’s Chief Executive Officer ("CEO"), and to other persons serving as executive officers of the Company as of December 31, 2003, whose salary and bonus for such year exceeded $100,000 (collectively, the “Named Executive Officers”), for the last three completed fiscal years.
Long Term Compensation | ||||||||
Summary Compensation Annual Compensation | Awards | Payouts | ||||||
Name and Principal Position | Year | Salary | Bonus | Other Annual Compen- sation | Restricted Stock Award(s) | Securities Underlying Options/SARs (#) | LTIP Payouts | All Other Compen-sation |
$ | $ | $ | $ | $ | $ | $ | ||
Molina, Edwin CEO | 2003 2002 2001 | 36,000 84,415 124,910 | -0- -0- -0- | (2-5) 5,650 -0- (6)125,000 | -0- -0- -0- | -0- (15)900,000 -0- | -0- -0- -0- | -0- -0- -0- |
Drescher, Anton CFO | 2003 2002 2001 | (1) 40,399 (1) 81,311 (1) 120,000 | -0- -0- -0- | (7-10) 4,900 -0- (11)200,000 | -0- -0- -0- | -0- (16) 750,000 -0- | -0- -0- -0- | -0- -0- -0- |
Smith, Robert Former COO | 2003 2002 2001 | -0- 27,139 89,142 | -0- -0- -0- | -0- -0- (12-14) 22,900 | -0- -0- -0- | -0- (17) 500,000 -0- | -0- -0- -0- | -0- -0- -0- |
(1)
Represents consulting fees paid to Mr. Drescher through Harbour Pacific Capital Corp., a consulting firm wholly-owned by him, for his services as an executive officer of the Company.
(2)
In February 2003, Mr. Molina purchased 250,000 units (each comprised of one common share and one warrant to acquire one common share at $0.0657 per share) at $0.0657 per unit. This compensation resulted from the difference between the $0.0657 purchase price and the $0.0657 warrant exercise price and the fair market price of $0.075 of the common shares on the date of issuance of the units.
(3)
In April 2003, Mr. Molina purchased 100,000 units (each comprised of one common share and one warrant to acquire one common share at $0.075 per share) at $0.068 per unit. This compensation resulted from the difference between the $0.068 purchase price and the $0.075 warrant exercise price and the fair market price of $0.078 of the common shares on the date of issuance of the units.
(4)
In May 2003, Mr. Molina purchased 50,000 units (each comprised of one common share and one warrant to acquire one common share at $0.1175 per share) at $0.088 per unit. This compensation resulted from the difference between the $0.088 purchase price and the $0.1175 warrant exercise price and the fair market price of $0.102 of the common shares on the date of issuance of the units.
(5)
In September 2003, Mr. Molina purchased 100,000 units (each comprised of one common share and one warrant to acquire one common share at $0.095 per share) at $0.08 per unit. This compensation resulted from the difference between the $0.08 purchase price and the $0.095 warrant exercise price and the fair market price of $0.09 of the common shares on the date of issuance of the units.
(6)
In March 2001, Mr. Molina purchased 250,000 units (each comprised of one common share and one warrant to acquire one common share at $0.66 per share) at $0.54 per unit. This compensation resulted from the difference between the $0.54 purchase price and the $0.66 warrant exercise price and the fair market price of $0.84 of the common shares on the date of issuance of the units.
(7)
In February 2003, Mr. Drescher purchased 250,000 units (each comprised of one common share and one warrant to acquire one common share at $0.0657 per share) at $0.0657 per unit. This compensation resulted from the difference between the $0.0657 purchase price and the $0.0657 warrant exercise price and the fair market price of $0.075 of the common shares on the date of issuance of the units.
(8)
In April 2003, Mr. Drescher purchased 100,000 units (each comprised of one common share and one warrant to acquire one common share at $0.075 per share) at $0.068 per unit. This compensation resulted from the difference between the $0.068 purchase price and the $0.075 warrant exercise price and the fair market price of $0.078 of the common shares on the date of issuance of the units.
(9)
In May 2003, Mr. Drescher purchased 50,000 units (each comprised of one common share and one warrant to acquire one common share at $0.1175 per share) at $0.088 per unit. This compensation resulted from the difference between the $0.088 purchase price and the $0.1175 warrant exercise price and the fair market price of $0.102 of the common shares on the date of issuance of the units.
(10)
In September 2003, Mr. Drescher purchased 50,000 units (each comprised of one common share and one warrant to acquire one common share at $0.095 per share) at $0.08 per unit. This compensation resulted from the difference between the $0.08 purchase price and the $0.095 warrant exercise price and the fair market price of $0.09 of the common shares on the date of issuance of the units.
(11)
In March 2001, Mr. Drescher purchased 400,000 units (each comprised of one common share and one warrant to acquire one common share at $0.66 per share) at $0.54 per unit. This compensation resulted from the difference between the $0.54 purchase price and the $0.66 warrant exercise price and the fair market price of $0.84 of the common shares on the date of issuance of the units.
(12)
In March 2001, Mr. Smith purchased 40,000 units (each comprised of one common share and one warrant to acquire one common share at $0.66 per share) at $0.54 per unit. This compensation resulted from the difference between the $0.54 purchase price and the $0.66 warrant exercise price and the fair market price of $0.84 of the common shares on the date of issuance of the units.
(13)
In September 2001, Mr. Smith purchased 45,000 units (each comprised of one common share and one warrant to acquire one common share at $0.35 per share) at $0.27 per unit. This compensation resulted from the difference between the $0.27 purchase price and the fair market price of $0.29 of the common shares on the date of issuance of the units.
(14)
In December 2001, Mr. Smith purchased 100,000 units (each comprised of one common share and one warrant to acquire one common share at $0.26 per share) at $0.20 per unit. This compensation resulted from the difference between the $0.20 purchase price and the fair market price of $0.22 of the common shares on the date of issuance of the units.
(15)
In December 2002, Mr. Molina cancelled 900,000 stock options granted to him in February 2002.
(16)
In December 2002, Mr. Drescher cancelled 750,000 stock options granted to him in February 2002 and cancelled 200,000 stock options granted to him in December 2000.
(17)
In December 2002, Mr. Smith cancelled 500,000 stock options granted to him in February 2002.
The following table sets forth certain information concerning grants of stock options to the Named Executive Officers during the year ended December 31, 2003.
(1)
A total of –0- (zero) stock options were granted to employees and consultants in 2003. The only remaining stock option to an employee expired on January 31, 2004. As of the date of this Report, a total of -0- stock options are outstanding.
The following table sets forth certain information concerning exercises of stock options by the Named Executive Officers during the year ended December 31, 2003 and stock options held at year end.
Aggregated Option / SAR Exercises in Last Fiscal Year and FY-End Option / SAR Values | |||||
Number of Securities Underlying Unexercised Options / SARs at Fiscal year End (#) | Value of Unexercised In-the-Money Options / SARs at Fiscal Year End ($) | ||||
Name | Shares Acquired on Exercise (#) | Value Realised ($) | Exercisable/ Unexercisable | Exercisable/ Unexercisable | |
Molina, Edwin | -0- | -0- | 0 / 0 | N/A | / $0 |
Drescher, Anton | -0- | -0- | 0 / 0 | N/A | / $0 |
Loverso, Maurice | -0- | -0- | 0 / 0 | N/A | / $0 |
(1)
On December 31, 2003, the average of the high and low bid prices of the common shares on the OTC BB was $0.24.
Compensation of Directors
The Company has no arrangements, standard or otherwise, pursuant to which directors are compensated by the Company for their services in their capacity as directors, or for committee participation, involvement in special assignments or for services as consultant or expert during the most recently completed financial year or subsequently, up to and including the date of this information circular, except as disclosed herein.
Employments Contracts
USA Video does not have an employment contract with Mr. Molina and the other Named Executive Officer. The Company has no obligation to provide any compensation to Mr. Molina or any other Named Executive Officer in the event of his resignation, retirement or termination, or a change in control of the Company, or a change in any Named Executive Officers' responsibilities following a change in control.
USA Video may in the future create retirement, pension, profit sharing and medical reimbursement plans covering its Executive Officers and Directors.
Compensation Committee Interlocks and Insider Participation
The Company does not have a compensation committee. Decisions concerning the compensation of the Company’s executive officers are made by the Board of Directors. All members of the Board during fiscal 2003 (Edwin Molina, Anton J. Drescher and Maurice Loverso) participated in the Board’s deliberations concerning executive officer compensation during the fiscal year ended December 31, 2003.
Board of Directors Report on Executive Compensation
The Board of Directors determines the compensation of the Company’s executive officers.
BOARD OF DIRECTORS: Report on Executive Compensation
The Company does not have a formal compensation committee. The Company intends to establish a compensation committee at such time as it is able to attract a sufficient number of outside directors to the Board. The Company is unable to state when it will be able to establish a formal compensation committee. Pending establishment of the committee, the entire Board of Directors will continue to be responsible for the Company’s executive compensation policy. The three current members of the Board are the Company’s senior executive officers.
Compensation Philosophy
The Company must compete for, attract, develop, motivate and retain high quality executive management personnel. In order to do so, the Company offers a package including a competitive salary, benefits and, on a discretionary basis, additional compensation in the form of stock options.
Cash Compensation
The Company’s executive salary levels are intended to be consistent with competitive salary levels and job responsibilities and experience level of each executive, as well as the Company’s overall salary structure and financial condition. Salary changes reflect competitive and economic trends, the overall financial performance of the Company and the performance of the individual executive. Salaries are reviewed annually by the Board.
Stock Options
Stock options are designed to attract and retain executives who can make significant contributions to the Company’s success, reward executives for such contributions, give executives a long-term incentive to increase shareholder value, and align the interests of the Company’s executive officers with those of its shareholders.
The Board has made, and expects to continue to make, grants of stock options to executive officers. Recipients of option grants, and the size of the grants, are determined based on several factors, including the responsibilities of the individual officers, their past and anticipated contributions to the Company’s success, the Company’s overall performance, and prior option grants. All options granted to executive officers have an exercise price at least equal to the market price of the Company’s common shares at the time of the grant.
Compensation of the Chief Executive Officer
In setting the compensation payable for 2003 to Edwin Molina, the Company’s Chief Executive Officer, the Board generally considered the same factors described above. Additionally, the Board intends that Mr. Molina’s compensation be competitive with compensation paid to chief executive officers of similar sized companies in the Company’s industry and to reward Mr. Molina for directing the Company’s efforts in initiating and expanding its streaming media business.
IRS Limits on Deductibility of Compensation
The Company is subject to Section 162(m) of theInternal Revenue Code of 1986, as amended, which limits the deductibility of certain compensation payments to the Company’s executive officers in excess of $1.0 million. The Board expects that cash compensation in 2004 paid to the Chief Executive Officer or any other executive officer to be well below $1.0 million. Section 162(m) also provides for certain exemptions to the limitations on deductibility, including compensation that is “performance-based” within the meaning of Section 162(m). Because the Company does not currently have a compensation committee comprised solely of outside directors, the Company currently cannot avail itself of the “performance-based” compensation exemption under Section 162(m).
The Board of Directors during fiscal 2003 consisted of:
Edwin Molina
Anton J. Drescher
Maurice Loverso
Mr. Smith resigned as a director of the Company as of May 7th, 2003.
Performance Graph
The following graph compares USA Video's cumulative total shareholder returns with the cumulative total return for the last five years of (i) Russell 2500, and (ii) the Dow Jones - U.S. Technology, Software, Small Cap Index. The graph shows the value of $100 invested at the closing price on December 31, 1997, in USA Video common shares, the Dow Jones - U.S. Technology, Software, Small Cap Index and the Russell 2500, and assumes that all dividends are reinvested.
12/31/98 | 12/31/99 | 12/31/00 | 12/31/01 | 12/31/02 | 12/31/03 | |
USA Video(in US$) | $100.00 | $2,119.24 | $1,050.19 | $453.19 | $97.33 | $531.23 |
Russell 2500 | $100.00 | $124.14 | $129.44 | $131.02 | $107.71 | $156.72 |
Dow Jones US Technology, Software, Small Cap Index | $100.00 | $243.67 | $121.26 | $99.21 | $46.46 | $77.37 |
Certain Relationships and Related Transactions
In 2003, the Company paid consulting fees of $40,399 to Harbour Pacific Capital Corp., a company controlled by Anton J. Drescher, in consideration of Mr. Drescher's services as an executive officer of the Company.
In February 2003, USA Video completed a private placement of 2,750,000 units (each unit consisting of one common share and one warrant to purchase an additional common share at $0.0657 US per share) at a price of $0.0657 US per unit, of which 2,250,000 units were sold to outside investors and 550,000 units were sold to officers and directors of the Company. Because the rules of the TSX require that the offering price for privately placed securities of listed companies be set when the offering is first announced rather than upon closing, the sale price of the units and the exercise price of the warrants were below the market price of $0.075 US per common share on the date of issuance. Units were sold to the following officers and directors of the Company, in the amounts indicated: Edwin Molina (250,000 units) and Anton J. Drescher (250,000 units).
On April 8, 2003, USA Video completed a private placement of 1,500,000 units (each unit consisting of one common share and one warrant to purchase an additional common share at $0.075 US per share) at a price of $0.068 US per unit, of which 1,300,000 units were sold to outside investors and 200,000 units were sold to officers and directors of the Company. Because the rules of the TSX require that the offering price for privately placed securities of listed companies be set when the offering is first announced rather than upon closing, the sale price of the units and the exercise price of the warrants were below the market price of $0.078 US per common share on the date of issuance. Units were sold to the following officers and directors of the Company, in the amounts indicated: Edwin Molina (100,000 units) and Anton J. Drescher (100,000 units).
On May 30, 2003, USA Video completed a private placement of 1,500,000 units (each unit consisting of one common share and one warrant to purchase an additional common share at $0.088 per share) at a price of $0.1175 per unit, of which 1,400,000 units were sold to outside investors and 100,000 units were sold to officers and directors of the Company. Because the rules of the TSX require that the offering price for privately placed securities of listed companies be set when the offering is first announced rather than upon closing, the sale price of the units and the exercise price of the warrants were below the market price of $0.102 of the common shares on the date of issuance. Units were sold to the following officers and directors of the Company, in the amounts indicated: Edwin Molina (50,000 units) and Anton J. Drescher (50,000 units).
On September 23, 2003, USA Video completed a private placement of 3,000,000 units (each unit consisting of one common share and one warrant to purchase an additional common share at $0.095 per share) at a price of $0.095 per unit, of which 2,850,000 units were sold to outside investors and 150,000 units were sold to officers and directors of the Company. Because the rules of the TSX require that the offering price for privately placed securities of listed companies be set when the offering is first announced rather than upon closing, the sale price of the units and the exercise price of the warrants were below the market price of $0.09 of the common shares on the date of issuance. Units were sold to the following officers and directors of the Company, in the amounts indicated: Edwin Molina (100,000 units) and Anton J. Drescher (50,000 units).
Subsequent to the year ended December 31, 2003, USA Video completed one additional private placement.
In January 2004, USA Video completed a private placement of 500,000 units (each unit consisting of one common share and one warrant to purchase an additional common share at $0.20 per share) at a price of $0.20 per unit, of which 450,000 units were sold to outside investors and 50,000 units were sold to officers and directors of the Company. Because the rules of the TSX require that the offering price for privately placed securities of listed companies be set when the offering is first announced rather than upon closing, the sale price of the units and the exercise price of the warrants were below the market price of $0.235 of the common shares on the date of issuance. Units were sold to the following officers and directors of the Company, in the amounts indicated: Edwin Molina (25,000 units) and Anton J. Drescher (25,000 units).
All common shares purchased in the above private placements are subject to a minimum twelve month hold period, during which period, they may not be sold by the shareholder.
ITEM 2:
RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The firm of Goldstein Golub Kessler LLP has been appointed by the Board of Directors to serve as the Company’s independent auditors for the 2004 fiscal year.
During the Company’s fiscal year ended December 31, 2003, and the period subsequent to such date and prior to engaging Goldstein Golub Kessler LLP, the Company has not consulted Goldstein Golub Kessler LLP with respect to the application of accounting principles to a specific transaction, either completed or proposed, the type of audit opinion that might be rendered on the Company’s financial statements; or any disagreements with Goldstein Golub Kessler LLP (of which there were none), or reportable events, as defined or described in Items 304(a)(2)(i) or (ii) of Regulation S-K.
Audit Fees
The aggregate fees billed to the Company for professional services rendered for the audit of the Company’s annual financial statements for the fiscal year ended December 31, 2003, and for the reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q for that fiscal year, were $22,547.
Financial Information Systems Design and Implementation Fees
Goldstein Golub Kessler LLP did not provide any professional services to the Company with respect to financial information systems design and implementation for the year ended December 31, 2003.
All Other Fees
Goldstein Golub Kessler LLP was not paid any other fees for services rendered to the Company during the year ended December 31, 2003.
Goldstein Golub Kessler LLP has advised the Company as follows: Goldstein Golub Kessler LLP has a continuing relationship with American Express Tax and Business Services, Inc. (“TBS”) from which it leases auditing staff who are full time, permanent employees of TBS and through which its partners provide non-audit services. As a result of this arrangement, Goldstein Golub Kessler LLP has no full time employees and therefore, none of the audit services performed were provided by permanent full-time employees of Goldstein Golub Kessler LLP. Goldstein Golub Kessler LLP manages and supervises the audit and audit staff, and is exclusively responsible for the opinion rendered in connection with its examination.
Required Vote
The affirmative vote of a majority of the votes cast on this Item at the Annual Meeting is required for the ratification of the appointment of Goldstein Golub & Kessler LLP as the Company’s auditors for the fiscal year ending December 31, 2003.
The Board of Directors unanimously recommends a vote FOR the ratification of Goldstein Golub Kessler LLP as the Company’s independent auditors for the current fiscal year.
REQUIREMENTS, INCLUDING DEADLINES, FOR
SUBMISSION OF PROXY PROPOSAL, NOMINATION OF DIRECTORS
AND OTHER BUSINESS OF SHAREHOLDERS
Under the rules of the SEC, if a shareholder wants the Company to include a proposal in its Proxy Statement and form of proxy for presentation at the Company’s 2005 Annual Meeting of Shareholders, the proposal must be received by the Company, Attention: Mr. Anton J. Drescher, Secretary, at the Company’s principal executive offices no later thanMarch 10, 2005and all the other conditions of Rule 14a-8 under theSecurities Exchange Act of 1934 must be satisfied, for such proposals to be included in the Company’s proxy statement and form of proxy relating to that meeting.
In addition, the proxy solicited by the Board of Directors for the 2005 Annual Meeting of Shareholders will confer discretionary authority to vote on any shareholder proposal presented at that meeting, unless the Company is provided with notice of such proposal no later than May 25, 2005
The Board is not aware of any matters that are expected to come before the Annual Meeting other than those referred to in this Proxy Statement. If any other matter should come before the Annual Meeting, the persons named in the accompanying proxy intend to vote the proxies in accordance with their best judgment.
The chairman of the meeting may refuse to allow the transaction of any business not presented beforehand, or to acknowledge the nomination of any person not made in compliance with the foregoing procedures.
It is important that the proxies be returned promptly and that your shares be represented. Shareholders are urged to mark, date, execute and promptly return the accompanying proxy card in the enclosed envelope.
FORM 10-K
The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003, including the financial statements and a list of exhibits, is enclosed with this Proxy Statement.
The Company will mail to any shareholder, without charge and upon written request, a copy of any exhibit to the Annual Report. Requests should be sent to USA Video Interactive Corp., 83 Halls Road, Old Lyme, Connecticut 06371, Attention: Investor Relations.
By Order of the Board of Directors
/s/
Anton J. Drescher
Anton J. Drescher,
Secretary
June 8th, 2004
Appendix “A”
USA VIDEO INTERACTIVE CORP.
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
1.
PURPOSE
The Audit Committee (the "Committee") of USA Video Interactive Corp. (“USA Video”) is a committee of the Board of Directors with the responsibility under the governing legislation of USA Video to review the financial statements, accounting policies and reporting procedures of USA Video.
The primary function of the Committee is to assist the Board of Directors in fulfilling its oversight responsibilities by reviewing the financial reports and other financial information provided by USA Video to any governmental body or the public, the systems of internal controls of USA Video regarding finance, accounting and legal compliance that management and the Board have established, and the auditing, accounting and financial reporting processes of USA Video generally. Consistent with this function, the Committee should encourage continuous improvement of, and should foster adherence to, the policies, procedures and practices at all levels of USA Video.
The primary duties and responsibilities of the Committee are to:
•
Serve as an independent and objective party to monitor the financial reporting process and the system of internal controls of USA Video.
•
Monitor the independence and performance of the auditor of USA Video (the “Auditor”) and the internal audit function of USA Video.
•
Provide an open avenue of communication among the Auditor, financial and senior management and the Board of Directors.
The Committee will primarily fulfill these responsibilities by carrying out the activities set out in Section 4 of this Charter.
2.
COMPOSITION
•
The Committee shall be comprised of two or more directors as determined by the Board of Directors. The composition of the Committee shall adhere to all applicable corporate and securities laws and all requirements of the stock exchanges on which shares of USA Video are listed. In particular, the composition of the Committee shall be in accordance with the U.S.Securities Exchange Act of 1934, as amended, and the required qualifications and experience of the members of the Committee, subject to any exemptions or other relief that may be granted from time to time.
•
All members of the Committee shall have a working familiarity with basic finance and accounting practices, and at least one member of the Committee shall be a "financial expert" in accordance with applicable laws and all requirements of the stock exchanges on which shares of USA Video are listed.
•
Members of the Committee shall be elected by the Board at the meeting of the Board held immediately after the annual meeting of shareholders or such other times as shall be determined by the Board and shall serve until the next such meeting or until their successors shall be duly elected and qualified.
•
Any member of the Committee may be removed or replaced at any time by the Board of Directors and shall cease to be a member of the Committee as soon as such member ceases to be a director. Subject to the foregoing, each member of the Committee shall hold such office until the next annual meeting of shareholders after his or her election as a member of the Committee.
•
The members of the Committee shall be entitled to receive such remuneration for acting as members of the Committee as the Board of Directors may from time to time determine.
3.
MEETINGS
•
The Committee may appoint one of its members to act as Chairman of the Committee. The Chairman will appoint a secretary who will keep minutes of all meetings (the "Secretary"). The Secretary does not have to be a member of the Committee or a director and can be changed by written notice from the Chairman.
•
No business may be transacted by the Committee except at a meeting at which a quorum of the Committee is present or by a consent resolution in writing signed by all members of the Committee. A majority of the members of the Committee shall constitute a quorum, provided that if the number of members of the Committee is an even number, one half of the number of members plus one shall constitute a quorum.
•
The Committee will meet as many times as is necessary to carry out its responsibilities, but in no event will the Committee meet less than four times a year. The Committee shall meet at least once annually with the Auditor. As part of its duty to foster open communication, the Committee should meet at least annually with management and the Auditor in separate executive sessions to discuss any matters that the Committee or each of these parties believe should be discussed privately. In addition, the Committee shall meet with the Auditor and management at least quarterly to review the financial statements of USA Video.
•
The time at which, and the place where, the meetings of the Committee shall be held, the calling of meetings and the procedure in all respects of such meetings shall be determined by the Chairman, unless otherwise provided for in the By-Laws of USA Video or otherwise determined by resolution of the Board of Directors.
•
The Committee may invite to, or require the attendance at, any meeting of the Committee, such officers and employees of USA Video, legal counsel or other persons as it deems necessary in order to perform its duties and responsibilities. They should also be requested or required to attend meetings of the Committee and make presentations to the Committee as appropriate.
•
Subject to the provisions of the governing legislation of USA Video and applicable regulations the Chairman of the Committee may exercise the powers of the Committee in between meetings of the Committee. In such event, the Chairman shall immediately report to the members of the Committee and the actions or decisions taken in the name of the Committee shall be recorded in the proceedings of the Committee.
4.
RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Committee shall:
Documents/Reports Review
•
Review and recommend for approval to the Board of Directors of USA Video any revisions or updates to this Charter. This review should be done periodically, but at least annually, as conditions dictate.
•
Review the interim unaudited quarterly financial statements and the annual audited financial statements, and the related press releases of USA Video and report on them to the Board of Directors.
•
Satisfy itself, on behalf of the Board of Directors, that the unaudited quarterly financial statements and annual audited financial statements of USA Video are fairly presented both in accordance with generally accepted accounting principles and otherwise, and recommend to the Board of Directors whether the quarterly and annual financial statements should be approved.
•
Satisfy itself, on behalf of the Board of Directors, that the information contained in the quarterly financial statements of USA Video, annual report to shareholders and similar documentation required pursuant to the laws of the United States does not contain any untrue statement of any material fact or omit to state a material fact that is required or necessary to make a statement not misleading, in light of the circumstances under which it was made.
•
Review any reports or other financial information of USA Video submitted to any governmental body, or the public, including any certification, report, opinion or review rendered by the Auditor.
•
Review, and if deemed advisable, approve all related party transactions as defined in the governing legislation of USA Video.
•
Have the right, for the purpose of performing their duties: (i) to inspect all the books and records of USA Video and its subsidiaries; (ii) to discuss such accounts and records and any matters relating to the financial position of USA Video with the officers and auditors of USA Video and its subsidiaries and the Auditor; (iii) to commission reports or supplemental information relating to the financial information; (iv) to require the Auditor to attend any or every meeting of the Committee; and (v) to engage such independent counsel and other advisors as are necessary in the determination of the Committee.
•
Permit the Board of Directors to refer to the Committee such matters and questions relating to the financial position of USA Video and its affiliates or the reporting related to it as the Board of Directors may from time to time see fit.
Independent Auditor
•
Be directly and solely responsible for the appointment, compensation, and oversight of the work of the Auditor of USA Video upon shareholder approval of the appointment, with such Auditor being ultimately accountable to the shareholders, the Board and the Committee.
•
Act as the Auditor's channel of direct communication to USA Video. In this regard, the Committee shall, among other things, receive all reports from the Auditor of USA Video, including timely reports of:
1.
all critical accounting policies and practices to be used;
2.
all alternative treatments of financial information within generally accepted accounting principles that have been discussed with the management of USA Video, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the Auditor of USA Video; and
3.
other material written communications between the Auditor and the management of USA Video, including, but not limited to, any management letter or schedule of unadjusted differences.
•
Satisfy itself, on behalf of the Board of Directors that the Auditor is "independent" of management, within the meaning given to such term in the rules and pronouncements of the applicable regulatory authorities and professional governing bodies. In furtherance of the foregoing, the Committee shall request that the Auditor at least annually provide a formal written statement delineating all relationships between the Auditor and USA Video, and request information from the Auditor and management to determine the presence or absence of a conflict of interest. The Committee shall actively engage the Auditor in a dialogue with respect to any disclosed relationships or services that may impact the objectivity and independence of the Auditor. The Committee shall take, or recommend that the full Board take, appropriate action to oversee the independenc e of the Auditor.
•
Be responsible for pre-approving all audit and non-audit services provided by the Auditor; provided, however, that the Committee shall have the authority to delegate such responsibility to one or more of its members to the extent permitted under applicable law and stock exchange rules.
•
Review the performance of the Auditor and make recommendations to the Board of Directors as to whether or not to continue to engage the Auditor.
•
Determine and review the remuneration of the Auditor and any independent advisors (including independent counsel) to the Committee.
•
Satisfy itself, on behalf of the Board of Directors, that the internal audit function has been effectively carried out and that any matter which the Auditor wishes to bring to the attention of the Board of Directors has been addressed and that there are no "unresolved differences" with the Auditor.
Financial Reporting Process and Risk Management
•
Review the audit plan of the Auditor for the current year and review advice from the Auditor relating to management and internal controls and the responses of USA Video to the suggestions made put forth.
•
Monitor the internal accounting controls, informational gathering systems and management reporting on internal controls of USA Video.
•
Review with management and the Auditor the relevance and appropriateness of the accounting policies of USA Video and review and approve all significant changes to such policies.
•
Satisfy itself, on behalf of the Board of Directors, that USA Video has implemented appropriate systems of internal control over financial reporting and the safeguarding of the assets of USA Video and other "risk management" functions (including the identification of significant risks and the establishment of appropriate procedures to manage those risks and the monitoring of corporate performance in light of applicable risks) affecting the assets of USA Video, management, financial and business operations and the health and safety of employees and that these systems are operating effectively.
•
Review and approve the investment and treasury policies of USA Video and monitor compliance with such policies.
•
Establish procedures for the receipt and treatment of (i) complaints received by USA Video regarding accounting, controls, or auditing matters and (ii) confidential, anonymous submissions by employees of USA Video as to concerns regarding questionable accounting or auditing.
Legal and Regulatory Compliance
•
Satisfy itself, on behalf of the Board of Directors, that all material statutory deductions have been withheld by USA Video and remitted to the appropriate authorities.
•
Without limiting its rights to engage counsel generally, review, with the principal legal external counsel of USA Video, any legal matter that could have a significant impact on the financial statements of USA Video.
•
Satisfy itself, on behalf of the Board of Directors, that all regulatory compliance issues have been identified and addressed.
Budgets
•
Assist the Board of Directors in the review and approval of operational, capital and other budgets proposed by management.
General
•
Perform any other activities consistent with this Charter, the By-laws of USA Video and governing law, as the Committee or the Board of Directors deem necessary or appropriate.
USA VIDEO INTERACTIVE CORP.
PROXY
2004 Annual Meeting of Shareholders
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS)
KNOW ALL MEN BY THESE PRESENTS, that the undersigned shareholder of USA Video Interactive Corp., hereby constitutes and appoints Edwin Molina and Anton J. Drescher and each or either of them, or instead of any or all of the foregoing, __________________ the attorneys and proxies of the undersigned with full power of substitution to act and vote for an in the name, place and stead of the undersigned, at the 2004 Annual Meeting of the Shareholders of the Company, to be held at 11:00 a.m. on Friday, July 9th, 2004, and at any adjournments thereof, the number of votes the undersigned would be entitled to cast if present upon all matters referred to below and described in the Proxy Statement for the meeting and, at their discretion, upon any other matters that may properly come before the meeting:
(1)
ELECTION OF DIRECTORS:
VOTE FOR ALL NOMINEES LISTED BELOW
_______
WITHHOLD AUTHORITY
_______
Nominees:
Edwin Molina
Anton J. Drescher
Maurice Loverso
INSTRUCTIONS: To withhold authority to vote for any individual nominee(s) listed above, write the nominee's name in the space provided below.
Exceptions
______________________
(2)
RATIFICATION OF APPOINTMENT OF GOLDSTEIN GOLUB KESSLER LLP AS INDEPENDENT AUDITORS:
FOR _______
AGAINST_______
ABSTAIN ______
When properly executed, this Proxy will be voted in the manner specified by the Shareholder. Unless you specify otherwise, this Proxy will be voted “FOR” the election of all of the nominees as directors and “FOR” Item 2.
A majority of the proxies, or their substitutes at the meeting, or any adjournments thereof may exercise all of the powers given by this Proxy. Any Proxy to vote any of the shares for which the undersigned is or would be entitled to vote previously given to any person or persons other than the persons named above is hereby revoked.
IN WITNESS WHEREOF, the undersigned has signed and sealed this Proxy and acknowledges receipt of a copy of the notice of said meeting and proxy statement in reference thereto both dated June 8th, 2004.
Dated: __________________, 2004
____________________________________
Number of Shares
____________________________________
Print Name of Shareholder
____________________________________
Signature of Shareholder
Joint Owners should each sign. Attorneys-in-fact, administrators, custodians, partners, or corporation officers should give full title.
NOTE: This proxy, properly completed, dated and signed, should be returned immediately in the enclosed, envelope to Computershare Trust Company Inc., 530 8th Avenue SW, Calgary, Alberta, T2P 3S8.
USA VIDEO INTERACTIVE CORP.
(the “Company”)
Request Form
Pursuant to National Instrument 51-102
In accordance with National Instrument 54-102 of the Canadian Securities Administrators, registered and beneficial shareholders of the Company may elect annually to receive a copy of the Company’s annual audited financial statements and Management Discussion & Analysis and/or interim financial statements and Management Discussion & Analysis of the Company, if they so request. If you wish to receive such mailings, please complete and return this form.
Please note that this Request Form will be mailed annually and both registered and beneficial securityholders must return this form annually in order to remain on the Company’s distribution list.
PLEASE RETURN TO:
USA Video Interactive Corp.
#507, 837 West Hastings Street
Vancouver, British Columbia, Canada V6C 3N6
NAME:(please print)
______________________________________________________________
ADDRESS:
______________________________________________________________
______________________________________________________________
POSTAL CODE:
__________________________________
SIGNATURE OF
SHAREHOLDER:
___________________________________
DATE:
_____________
The undersigned securityholder of the Company hereby elects to receive:
Annual Financial Statements and Management Discussion & Analysis
Interim Financial Statements and Management Discussion & Analysis
The Canadian Securities Administration recognizes that developments in information technology allow companies to disseminate documents to securityholders and investors in a more timely and cost efficient manner than by traditional paper methods. By providing an e-mail address, you will be deemed to be consenting to the electronic delivery to you at such e-mail address of the interim financial statements and reports, if electronic delivery is allowed by applicable regulatory rules and policies.
E-MAIL ADDRESS